NEWBURYPORT — The business dreams of two local men are literally about to mushroom.
Nate Seyler and Devin Stehlin are poised to take the startup gourmet mushroom production business they began two years ago in a garage and turn it into a 5,000- to 6,000-pound-a-month operation.
This week, the partners, who moved their business to their hometown of Newburyport last year, received validation for their vision.
Their business plan for expansion of Shady Oaks Organics bested more than 40 submissions to win top prize in a competition hosted by the Enterprise Center at Salem State University.
Shady Oaks' co-founders said that while the $5,000 cash prize will come in handy, the opportunities and networking resulting from the 2012 North of Boston Business Plan Competition will be even more beneficial as they look to grow their company.
Both Seyler and Stehlin, who are in their mid-20s, said they saw the competition as a vehicle to motivate them to formulate a serious plan for their future.
"It's always nice to have another reason to step back and take a higher-level look at things," Seyler said. "You very rarely set aside time to organize things and get it on paper."
Their proposal was one of six to advance to the semifinals and then one of three to enter the final round of judging, which took place Monday night at the Enterprise Center in front of an audience of about 100.
The partners, who run the business together with college friend Leif Johnson, said they believe Shady Oaks' appeal rests in part with the local food movement that has consumers seeking fresh, native ingredients.
"When it comes down to it, people care about what they eat," Seyler said. "We think it's really important for food producers to do so in a way that not only makes them money, but beyond that, produces a top-quality product that doesn't harm the environment and puts together a model that really gives back to the community.
"It's exciting for people to see that happening in their backyard."
With 75 percent of mushrooms grown in Pennsylvania and California, Shady Oaks is filling a void locally, Stehlin said. Because mushrooms are fragile with a short shelf life, their quality suffers in transit, he said. Since Shady Oaks' organically cultivated, specialty mushrooms are sold to restaurants and at farmers markets within 60 to 90 minutes of Newburyport, "our quality blows the competition out of the water," he said.
"The time from harvest to use is critical," said Stehlin, adding that the company is now selling every mushroom it's able to produce.
Locally, Shady Oaks' mushrooms are bought by Newburyport restaurants Ceia and Enzo and sold every other Sunday at the Newburyport Farmers Market.
In the next few months, Shady Oaks plans to replace the greenhouse in its headquarters on Graf Road with as many as 10, 20-foot shipping containers, stacked two together. The expansion will potentially increase their production capacity from 500 pounds of mushrooms a month to upward of 5,000 to 6,000 pounds monthly.
The increased production space will allow Shady Oaks to grow additional varieties of mushrooms beyond the four types of oyster and one strain of shiitake it now produces. New varieties will likely include lion's mane, a white pompom-like mushroom with a texture similar to crab meat that isn't available locally, and piopinno, a small mushroom with a brown cap and long, white stem that has a chestnut flavor.
The Shady Oaks team also hopes to build a first-class lab to maintain mushroom cultures and isolate new genetics from the mushrooms Stehlin finds while foraging the area.
Seyler said he's not as much surprised at Shady Oaks' success in the Business Plan Competition as he is proud of what his team has been able to accomplish and thankful for the support that's come from customers and advisers throughout the region.
"We worked really hard to put that (business plan) together. I feel like we have something really special going on here," Seyler said. But he added, "You can't do this type of thing by yourself."
Stehlin added that the competition introduced the partners to a few potential "angel investors," as well as commercial lenders from across the North Shore.
The North of Boston Business Plan Competition, which is in its eighth year, aims to support young and growing companies and encourage them to establish roots on the North Shore. Companies must be less than 3 years old or implementing a new growth strategy to enter.
"Small businesses are critical to the North Shore," Laura Swanson, chief operating officer of the Enterprise Center said in a press release. "First and foremost, they are the foundation of our regional economy. But, also, not all companies stay small. Wouldn't it be wonderful if we're nurturing a future household name or industry leader?"
Second place in the competition was shared by two Beverly-based companies — Advastim LLC, which is developing a wireless (leadless) system to improve spinal cord and other treatments involving neurostimulation, and Imagination Brands, which is the manufacturer of Doodle Roll, an all-in-one paper and crayon activity kit. They received $2,500 apiece.
Contest winners must commit to locating or remaining on the North Shore and growing to at least five full-time or full-time-equivalent employees within two years.
That's not a problem for Seyler and Stehlin, who said they're both hometown guys who have every intention of staying local.
"We want to support our local community and give back to where we came from," Stehlin said, adding, "We're going for it. We're reaching for the stars and putting ourselves into it. We're so passionate about this."